Most areas of Texas have hard costs that are about 10% below the national average, whereas most of Southern California (excluding coastal communities) have costs that are about 18% higher.
Part of the differences in costs are in these so-called indirect costs. Much of Texas is notoriously lenient on land planning issues, which is how you end up with oil refineries being located adjacent to residential subdivisions.
The entitlement process in California absolutely does add to the construction costs. And like I said before, those costs aren’t going away.
Part of that is due to the limitations of Prop 13. Since the local governments can’t significantly raise property taxes to pay for infrastucture it all has to be paid up front, either in the form of the additional fees that get rolled into the construction costs or in the form of Mello-Roos.
That’s why property tax rates in Texas (and other areas) are double what they are here. So while you only pay $200k for the house, you’re also paying $4,800/year in property taxes. That adds up after a while. $200/month in additional property taxes is equivalent to making an additional mortgage payment on another $30,000, so that right there makes your $200k home purchase in Texas the equivalent of a $230k home here in California.
Lastly, there’s also the workman comp premiums and other labor-related costs other than wages. Those aren’t going away either.
So yeah, there’s lots of good reasons why new construction in California will always be higher than in Texas. But there’s no real reason for it to be double or triple, and there never was. The only reason it was higher was because people were willing to pay more.
